Almost every single year VAT taxpayers in Poland may expect that as of 1 January 2014 significant changes in the Value Added Tax Act (henceforth VAT Act) will come into effect. From the beginning of 2014, the VAT Act will, for the first time, provide the taxpayers with the definitions of a traditional paper invoice and an electronic invoice. It will also provide for an updated list of VAT exemptions, both subjective and objective, as well as guidance on the calculation of turnover in case of proportion. A number of the aforementioned changes were covered in our October’s Tax Alert 24/2013, and therefore in this issue, we have decided to focus only on those changes in value-added tax that are, in our view, most significant and may constitute some problems in your tax returns.
Tax point changes are probably most paramount of all. As yet, in the majority of cases, it was the issuance of VAT invoice that determined the tax point - which was of course related to the date of supply of goods or services (not later, however, than on the 7th day after the day of delivery of goods or service provision - art.19 paragraph 4 of VAT Act). According to planned amendments, the tax point will be no longer linked to the invoice date, but solely to the date of supply - which is currently the general rule included in current art. 19 paragraph 1 of VAT Act. Hence, from January 2014, a seller making a sale on the last days of a month, will not be allowed to decide whether they would settle a given transaction in the current or the following month, which was so far related to the invoice date. Therefore, with the beginning of the year 2014, a greater importance will be assigned to delivery/receipt notes, which will serve determining the date of transaction settlement.
There are, however, a number of exceptions to the abovementioned general rule, which have been defined in the amended VAT Act. Fortunately, their number has been significantly limited in comparison to the current list and refers to special tax points resulting from the following tax events:
- release of goods being the subject of a commission agreement- receiving full or partial payment;
- provision of exempt services pursuant to art. 43 paragraph 1 item 37-41 of VAT Act- receiving full or partial payment;
- construction works -issuing the invoice not later than on the 30th day of service provision;
- supply of electricity and gas, as well as continuous supplies of services- issuing the invoice not later than on the due date.
It is worth mentioning that art. 86 paragraph 10 of VAT Act has also been changed. According to its new version, the right to reduce the amount of output VAT by the amount of input VAT occurs in the settlement for the period, in which, in relation to goods bought or imported by the VAT taxpayer, the tax obligation arose. Consequently, the buyer's right to exempt input VAT and the seller's tax point have been correlated, but with the reservation that the buyer received the invoice within this period (art. 86 paragraph 10b item 1 of VAT Act). Art 86 paragraph 11 of the Act remains unchanged, and still allows the buyer to reduce the amount of output VAT in the tax return for one of the two following settlement periods if they do not reduce this amount at the settlement period of receiving the invoice. As far as intra-community supply of goods is concerned, the buyer may settle VAT arising from this transaction for the month in which the tax point occurred if they receive the invoice documenting the intra-community supply of goods and include output VAT on intra-community supply of goods in their tax return, in which they are obliged to settle this tax, within three months from the end of the month of the tax point (Art. 86 paragraph 10b, item 2 of VAT Act). Consequently, the taxpayer is allowed to declare input and output VAT in the same month. Pursuant to Art. 86 paragraph 10g of VAT Act, in case the taxpayer does not receive the invoice documenting intra-community supply of goods in the aforementioned time period, the buyer will reduce the amount of input VAT in the settlement for the period in which the three-month deadline expired. When the taxpayer finally receives the VAT invoice for intra-community supply of goods, they can increase input VAT in the settlement for the period in which they received the invoice.
A new definition of the tax base will be provided in the newly added Art 29a paragraph 1 of VAT Act. Pursuant to the article, the taxable amount would be everything that constitutes the acquisition price of goods, including subsidies, grants and other similar funds with direct influence on the price of goods delivered or services provided by the taxpayer. Consequently, the turnover is no longer the tax base. The further part of the regulation is enriched with new articles, namely art. 30a-30c of VAT Act. The articles indicate ways of determining the taxable amount in the case of intra-community supply of goods, or import of goods and services.
Art. 29a paragraph 7 of the Act is also worth close look, due to the fact that it indicates amounts that cannot constitute the tax base. Examples of such amounts are early payment discounts, and other kind of discounts both given to the buyer or ordering party, which are included at the moment of sale, and received from the buyer and the ordering party as reimbursement of expenses incurred to the benefit of the buyer or the ordering party and temporarily presented in the taxpayer's VAT register.
There is one more article added to VAT Act, namely art. 29a paragraph 15 item 4, which indicates that the taxpayer is not obliged to possess a written confirmation of receipt of a credit note if they have not received this confirmation despite their attempt to deliver the note. The taxpayer's steps taken to deliver the credit note have to be evidenced in writing. It should also be evident from the taxpayer's documents that the buyer or the ordering party is aware that the transaction was carried out in accordance with the terms of sale stated on the credit note. Only when both of the conditions are fulfilled, may the taxpayer reduce the tax base. This regulation results from the judicial decision of the Court of Justice of the European Union (henceforth CJEU) as of 26 January 2012 in the Polish case (Ref. No. C-588/10 the Ministry of Finance vs. Kraft Foods Polska S.A.). The CJEU rendered the decision that it is possible for the taxpayer to settle the tax without possessing the confirmation of receipt of the credit note if obtaining such confirmation within a reasonable deadline is impossible or impracticable. The taxpayer, however, is obliged to prove that they have taken all the possible steps to obtain the confirmation.
The key change that will become effective as of 1 January 2014 is the transfer of law provisions concerning the issuance of invoices from executive ordinances of the Minister of Finance directly to the VAT Act. The added articles, namely Art. 106a-106q of VAT Act, among others, point to:
- persons and entities required to issue invoices;
- mandatory items that each invoice should include;
- the provisions concerning credit and debit notes.
Although the majority of the abovementioned changes are technical in nature, certain nuances appear. Art. 106i paragraph 7 of vAt Act indicates that the invoice can be issued up to 30 days before the supply of goods or provision of services, as well as 30 days before the date of receiving the full or partial payment for the future transaction.
Another substantial change is the obligation to issue the invoice until the 15th calendar day of the month following the month in which the transaction took place. In order to limit the number of documents generated by taxpayers there is still a possibility to issue collective invoices. The collective invoices can be issued for all transactions performed to the benefit of one counterparty in one month. Currently such an invoice can be issued not later than on the last day of a given month. In the amended Act the issue date of a collective invoice has not been specified, and therefore, the general rule should be applied. The rule is that the invoice has to be issued not later than on the 15th day of the following month (which means more time to count up all the transactions).
The regulations referring to simplified invoices have been also specified. In case the total amount due does not exceed PLN 450 or EUR 100, the seller can issue the simplified invoice, on which the buyer's data, the unit price, the net value or the tax rate is not presented. It should be noted, however, that those regulations, pursuant to art. 100e paragraph 6 of VAT Act, are not-applicable to a natural person who is not operating a business. Such persons have no TIN (Tax identification number) because they are not VAT taxpayers. The simplified invoice has to include the tax identification number. Therefore, the seller should pay attention to the fact that simplified invoice cannot be issued to every counterparty.
Lastly, we would like to draw your attention to one significant aspect. The amendments to VAT regulations waived art. 19, 29, 106, replacing them with new articles. The possibility of using the individual interpretations after such a change in regulations is a controversial issue. However, both the law and the jurisdiction of administrative courts point to the fact that it is the tax law as a whole that should be ministerially interpreted. This means the individual interpretation does not refer to certain, single regulations, understood as separate editing units of a legal act that are constituting legal norms. Its subject is the tax law as a system of mutually related regulations that constitute legal norms. In view of the considerations presented, the conclusion may be drawn that editorial changes of those regulations, which do not change the legal norm itself, do not change the subject of interpretation. The interpretation still refers to the same actual state of affairs or future event, to which the same tax law applies - regardless of whether it consists of editorial units included in a given act.
If you use the interpretation in the scope of the tax point, the tax base or invoicing, please do not hesitate to contact us for further information and consultancy.